lørdag 10. november 2012

Did Mises & Hayek Not Predict the Great Depression ?

He talks down on people, and starts by calling things myths without investigating.He then gives a quote from Skousen book on the history of economic thought, even though most austrians regard it as a poor book and there are other direct sources that relates to this issue. This is a very typical, and pathetic style the blogger "Lord Keynes" has.

The quote:"“As his assistant in the university seminar which met every Wednesday afternoon, I [i.e., Fritz Machlup] usually accompanied him home. On these walks we would pass through a passage of the Kreditanstalt in Vienna [one of the largest banks in Europe]. From 1924, every Wednesday afternoon as we walked through the passage for pedestrians he said: ‘That will be a big smash.’ Mind you, this was from 1924 onwards; yet in 1931, when the crash finally came, I still held some shares of the Kreditanstalt, which of course had become completely worthless” … In the summer of 1929, Mises was offered a high position at the Kreditanstalt bank. His future wife, Margit, was ecstatic, but Lu surprised her when he decided against it. ‘Why not’ she asked. His response shocked her: ‘A great crash is coming, and I don’t want my name in any way connected with it’ … (Skousen 2009: 295–296)."

Lord Keynes take on this is:

"this prediction of the failure ofone Austrian bank is transformed into the prediction of US stock market crash in 1929. Mises is alleged to have warned his future wife that “a great crash” was coming, but I have seen no evidence to suggest he was referring to America or a global depression, or anything other than the Kreditanstalt bank with that statement. "

That is surely a bizarre interpretation. He claimed a big crash was coming, not in any sense for only that bank. Additionally, given that Kreditanstalt was among the biggest banks in all of Europe and given the cycle theory that he had established and he was teaching his students, it is not hard to see this statements in its proper context. But Lord Keynes has an agenda to not see this.

Furthermore, these allegations are even more unfounded as the Federal Reserve policy was explicitly critiqued in his book from 1913, The Theory of Money And Credit. And later in other essays were he dealt with Irving Fisher "dollar stabilization" policy and his claim that it would eliminate the business cycle.

Here is Mises conclusion, in 1913 when speculating upon the Fisher plan and what should instead be done:

"It has gradually become recognized as a fundamental principle of monetary policy that intervention must be avoided as far as possible. Fiduciary media are scarcely different in nature from money; a supply of them affects the market in the same way as a supply of money proper; variations in their quantity influence the objective exchange value of money in just the same way as do variations in the quantity of money proper. Hence, they should logically be subjected to the same principles that have been established with regard to money proper; the same attempts should be made in their case as well to eliminate as far as possible human influence on the exchange ratio between money and other economic goods. The possibility of causing temporary fluctuations in the exchange ratios between goods of higher and of lower orders by the issue of fiduciary media, and the pernicious consequences connected with a divergence between the natural and money rates of interest, are circumstances leading to the same conclusion."

Now tell me "Lord Keynes", is this not what "Minskyites" would recommend to eliminate crisies, the curbing of credit creation ? Well, Mises knew this in 1913, accept it.

BTW Irving Fisher is one of the chief founders of the crude version of macroeconomics passed off as science by all variations of keynesians and neo-classicals, and even the nonsensical index-number is still used by Post-Keynesians such as Steve Keen.